The Real Budget Battle No One Will Discuss

BudgetPresident Trump released his proposed 2018 Federal Budget. The battle lines are drawn. Expect to be inundated with articles like “The rich get richer, and the poor get…” We will quickly be fed up with class warfare, emotional bleeding hearts and hysterical politicos distorting statistics while pandering votes.

The final result will be a pathetic “compromise”. Remember, a camel is a horse designed by a committee of politicos. It’s bloated, stuffed so full of crap it cannot function in the manner it is intended.

The goal of congress

Politicos (career politicians) want a budget that will increase their power and reelection chances – not what is right for the majority of Americans.

They have turned spending taxpayers dollars to buy votes into an art form. Meaningful spending cuts are an unnatural act, regardless of political party. Cutting taxes may help election chances; however, only 50% of Americans pay federal income taxes.

Targeting a balanced budget is a farce. The working class should demand more, our bloated government is wasting billions of dollars every day.

Who gets the gold mine and who gets the shaft!

Federal Safety Net outlined government spending in the fiscal year 2015 & 2016:Federal Safety Net

If the income pie shrinks due to tax cuts, will there be real spending cuts or increased borrowing? Interest cost on the current $20 trillion debt is over $500 billion annually. Every 1% jump in interest rates adds $200 billion in interest cost to the budget.

The defense department, with friendly generals in the cabinet, wants a budget increase. I read that we have 800 military bases located in 70 countries around the globe. I’m sure they are necessary to support our never-ending wars. (Sarcasm intended)

Domestically, much of the debate will be framed around tax cuts for the rich, not caring about the poor. Politicos subscribe to the NIMBY (Not In My Back Yard) theory and will be screaming, cut expenses somewhere else.

Don’t expect the media to acknowledge that Presidents Kennedy and Reagan both cut taxes. While tax rates dropped, a couple years later, the economy rebounded and federal income tax revenue increased.

Expect to see a lot of data like this Econofact article, “Welfare and the Federal Budget”. Here is an excerpt:

“If policymakers have dual goals of reducing federal government spending and reducing cash support for non-working individuals to increase employment rates, a focus on welfare programs that provide income support to low-income families is misplaced. Those programs constitute a tiny share of federal spending and already have stringent work requirements.”

$732 billion (19%) in welfare and Medicaid spending in 2016 is tiny???

What is welfare supposed to do?

Is the goal of welfare to help the poor get on their feet, get a job and move up the economic ladder? Or, is it to provide a permanent underclass, keeping politicians who are “champions of the poor” in positions of power?

The Single Mother Guide article, “Temporary Cash Assistance For The Poor” discusses the Temporary Assistance For Needy Families (TANF) program.

“Single-mother families are worse off than any other types of households with slightly over 40% officially below the poverty level.

It comes as no surprise that many are homeless and unable to afford even the basic necessities like food & housing.

…TANF often becomes a …safety net for over 1.6 million families while they get back on their feet – with single mothers making up the bulk of welfare recipients.

The grand idea is to offer short-term assistance, with the aim of helping them get off of welfare – primarily through employment, which would lessen their need for assistance.” (Emphasis mine)

How’s the “Grand Idea” working out? Not very well according to a 2013 article, “Making it to the middle class”.

“It’s nice to think one can easily go from being dirt poor to filthy rich, but it doesn’t usually work that way.

Of people born into lower-income households, few will ever make it into the middle class, according to a study from Pew Charitable Trust. Only a tiny percentage rise into the highest income bracket.

Pew Charitable Trust

…Those that did move into at least the middle class had these traits in common:

  • College grads 53%
  • Two Income families 50%
  • White 35%
  • Did not experience unemployment 34%

The Pew data is from a study that has followed families since 1968. It uses 2009 numbers.

The top 1% is getting richer, the middle class is losing ground and the poor remain so. Why?

Three of the four bullet points are behavior, issues over which each individual has some control.

Federal Safety Net released a study in September 2017, “U.S. Poverty Statistics”. Three tables address the behavioral issues:

Marital Status

Marital Status

Working Age Adults

Working Age Adults

Educational Attainment

Educational Attainment

The conclusion…

“Young people can virtually assure that they and their families will avoid poverty if they follow three elementary rules for success – complete at least a high school education, work full time, and wait until age 21 and get married before having a baby. Based on an analysis of Census data, people who followed all three of these rules had only a 2 percent chance of being in poverty and a 72 percent chance of joining the middle class….”
…Ron Haskins of the Brookings Institution, testifying before Congress on June 5, 2012.

Data from The National Vital Statistics Report, “Births: Final Data for 2015” breaks down the birth rate for unwed mothers by age and race.

The results are staggering:

Births 2015

In 1965 approximately 25% of black children were born to unwed mothers. 50 years later it’s 71%. The War On Poverty has virtually destroyed the black family. 100% of the mothers 15 and under and 97.4% of mothers age 15-19 are not married.

It’s no wonder there has been little progress in moving up the economic ladder.

In the 1960’s out of wedlock birth was considered an unplanned pregnancy. Today, with the availability and reliability of birth control methods, many look at pregnancy as a choice. Taxpayers, who are struggling to make ends meet, rightfully question, “Why should I pay for choices others voluntarily make?”

Let’s unmask the real issue

There are three factors entering the budget fracas.

1. One side of the political aisle wants to change the behavior of the poor. They want to incentivize them to get an education, get a job, get off welfare, and move up the economic ladder through individual effort and initiative. Citizens are responsible for their own behavior.

2. The other side of the aisle sees things differently. They contend the argument should not be about behavior. They feel the real issue is inequality of income and wealth. The debate should be about why and how wealth should be redistributed – something for nothing.

3. The Tea Party (TEA = Taxed Enough Already) movement is a public backlash against the political establishment and wasteful spending.

Citizens are furious with the government confiscating the fruits of their labor while their standard of living is slipping and things continue to get worse. They want real tax cuts and spending cuts.

Politicos know that once you have instituted giveaway programs, rolling them back, no matter how ineffective the program is, will cause a huge public and media backlash. It’s politically easier to continue to waste tax dollars than admit failure.

Why haven’t the programs worked?

Government programs encouraging education and job skills have not worked because the political and community leadership is unwilling or unable to address the CORE of the problem.

I define culture as, “the unwritten norms, beliefs and values that define appropriate behavior.” Politicians and the media are correct when they point to income disparity between rich and poor; it’s very real. The dispute is over how to close the gap. The War on Poverty has made things worse. Insanity is defined as continuing with the same behavior expecting a different result.

Reducing welfare benefits to incentivize able-bodied people to work has also failed. We now have several generations who have lived their entire life on welfare. Politicos, community leaders, and clergy consistently hammer them. They’re told they are victims, discriminated against and should demand more money from the greedy rich. Are they poor because of the color of their skin or their lack of minimum job skills and work ethic?

Until the respective leaders stop spewing hatred and divineness, and redefine the definition of “appropriate behavior” from “dependent on others” to a “strong desire to be self-sufficient,” nothing will change. There must be a culture change before there is a behavior change.

It makes no difference which party is in power. Until there is a major leadership change in the poor communities, preaching a different and positive message (with media support), the poor will remain poor; trillions in tax dollars will be confiscated from the working class and redistributed (aka buying votes) while generations of poverty-stricken children will have no chance to improve their lot in life.

Will they ever learn?

Abe LincolnYou cannot help the poor by destroying the rich.

You cannot strengthen the weak by weakening the strong.

You cannot bring about prosperity by discouraging thrift.

You cannot lift the wage earner up by pulling the wage payer down.

You cannot further the brotherhood of man by inciting class hatred.

You cannot build character and courage by taking away men’s initiative and independence.

You cannot help men permanently by doing for them, what they could and should do for themselves.

Abraham Lincoln

On the Lighter Side

Over the last year, Jo and I have taken several short getaway trips to Las Vegas. I’m still trying to sort through the events of the Las Vegas Massacre. Our sympathies go out to those who suffered from the premeditated madness.

It’s senseless, and I’m angry! I’m angry that any human being, no matter how bad their lot in life, would see fit to harm innocent people.

I’m also furious with the political class. It makes no difference if it is a hurricane or a tragic shooting. Within hours we are bombarded with an idiotic, emotional political frenzy as politicos clamor for face time on television.

No matter what the president does, politicians and media personalities constantly hammer him, trying to outdo each other with sarcastic nit-picking criticism.

Do we really care what kind of shoes the first lady wears when boarding Air Force One? Do we really care that she and the mayor of San Juan both wore boots at the event in Puerto Rico? Is that crap really important?

Much of the public is fed up! It’s time for the political class to shut up. Now is not the time to divide the country with partisan politics. Politicos should get the hell out of the way, or roll up their sleeves and provide the resources to help those in need. This is a time to bring America together.

And finally…

My recent physical was a bit stressful. My blood pressure was a little higher than normal. I was praised for losing some weight and my “numbers” had improved. After running a short EKG, the doctor frowned, saying it was “slightly irregular”.

She said, my “check engine” light went on and I should visit the cardiologist to make sure all is OK. My “slightly irregular” EKG matched several others and is “my normal”. Blood pressure is back where it belongs and the “check engine” light is off.

The event was a blessing. It forced me to stop and reflect.

This week I wrote about changing behavior. I can lower my blood pressure by changing my behavior – particularly with a knife and fork in my hand.

Well-meaning friends have suggested I give up writing. I try to explain that is what I love. I don’t feel stress when I am researching and writing, it’s quite the opposite. I love the interactions and encouragement I get from my readers, that brightens my day.

If there is stress, it’s spending too much time focusing on the business side. I need to turn an expensive hobby into an inexpensive one. It won’t take too much for me to generate enough revenue to cover our cost; it is just setting up the systems to get it done.

We announced we are going to rework our FREE reports and use them to build revenue. I’m told that once the reports are written and the marketing systems are put in place, it requires very little time. I sure hope so.

If you haven’t done so, you can go to the Miller on The Money website and download the current versions for FREE until October 16th.

If you are a Facebook user we now have a Facebook Business Page. It would really help if readers would go there and “follow” us and “like” things you enjoy. My goal is to make the page interactive where readers can not only communicate with me in real time but also help each other.

I believe the biggest enemy of a retiree is boredom. If I have the ability to continue to be a productive member of society, regardless of my age, that is what I want to do.

Of course, this week had some irony. As I was cranked back on my Lazy-Boy doing my pondering, the following quote popped up on my Ipad.

The proper function of man is to live, not to exist. I shall not waste my days in trying to prolong them. I shall use my time.”

…Jack London

I always liked Jack London.

Until next time…

4 comments

  • Chuck

    One comment, one question.

    College grads 53%
    Two Income families 50%
    White 35%
    Did not experience unemployment 34%

    Three of the four bullet points are behavior, issues over which each individual has some control.

    I’m not sure I agree completely with this statement. Unemployment can happen regardless of behavior.

    Question: I’m still a novice regarding investing and you have written several times about buying gold and/or silver. Do you mean physically buying it or is there some sort of an investment such as a stock? I spoke with my financial advisor about this last time we met and he sort of looked at me like I was nuts.

    • Dennis Miller

      Hi Chuck,

      I am required to tell you I am not licensed or qualified to offer individual, personal investment advice. Most all my comments are general in nature and I will suggest you consult with a licensed professional.

      As to your first comment, unemployment can happen. If I understood the survey correctly 34% of the people did not experience unemployment.

      When I speak about buying gold, I am talking about owning the physical metal. Yes, I expect your financial advisor would look at you that way, it is very common. I’d urge you to go to the website http://www.milleronthemoney.com and scroll through the archives. Look for articles about gold and also inflation and you will see why I make the recommendations.

      I suggest you ask stock broker or financial advisors what they are doing to protect your life savings from inflation. If they say they use Treasury Inflation Protected Securities (TIPS) you may want to point out, by design they DO NOT protect your portfolio. If you have a $100,000 portfolio, including $10,000 in TIPS, only the amount in TIPS is inflation protected.

      Here are a couple links for you:
      https://milleronthemoney.com/the-gold-case/
      https://milleronthemoney.com/wolf-wolf-wolf-wolf/

      The latter article spells out the inflation concerns.

      Each investor has to use their own judgment. I hope the articles help.

      Best regards,
      Dennis

  • Bob M.

    “There must be a culture change before there is a behavior change.”

    That’s confusing the symptom with the root cause. The root cause is both far simpler than culture and far simpler to fix ….at least in some respects. The point here is that we must ask “what caused the symptom of cultural rot in the first place?” Both history and the libertarian record (mises.org library) both seem to indicate that there is one primary root cause:

    An unsound monetary system. One must understand that if The State (central government) was unable to debauch the currency, then they would be unable to subsidize the citizenry. It is this act of subsidization that CAUSES the cultural rot. Once the unsound monetary system is firmly in place, then what must The State do to pay for the ever increasing demands placed on it by the victimized and elite classes that demand it? Simple: they engage in legitimized theft of the citizenry. The State, in fact, engages in every form of deprivation imaginary in order to maintain itself and its benefactors in the way in which they have become accustomed to…until they can’t.

    I highly recommend Frank Chodorov’s “The Rise and Fall of Society” (available on Mises.org). Although written in the 1950s his work is as relevant today, and perhaps moreso, as it was then. This excerpt explains what I speak of, above:

    “The Welfare State is in fact an oligarchy of bureaucrats who, in return for the perquisites and prestige of office, undertake to confiscate and redistribute production according to formulae of their own imagination, with utter disregard of the principle that production must fall in the amount of the confiscation….The imperviousness of economic law to political law is shown in this historic fact: in the long run every State collapses, frequently disappears altogether and becomes an archeological curio. Every collapse of which we have sufficient evidence was preceded by the same course of events. The State, in its insatiable lust for power, increasingly intensified its encroachments on the economy of the nation, causing a consequent decline of interest in production, until at long last the subsistence level was reached and not enough above that was produced to maintain the State in the condition to which it had been accustomed. It was not economically able to meet the strain of some immediate circumstance, like war, and succumbed. Preceding that event, the economy of Society, on which State power rests, had deteriorated, and with that deterioration came a letdown in moral and cultural values; men “did not care.” That is, Society collapsed and drew the State down with it. There is no way for the State to avoid this consequence—except, of course, to abandon its interventions in the economic life of the people it controls, which its inherent avarice for power will not let it do. There is no way for politics to protect itself from politics.” – Frank Chodorov, “The Rise and Fall of Society”

    • Dennis Miller

      Hi Bob,

      Your point is well taken.

      Generally speaking, in primitive societies you either hunted for food or you starved. When it came to survival you were on your own.

      Now, along come the politicos who want the perks and power and, as you said, confiscate and redistribute wealth. That breeds a welfare state and since LBJ it has been growing to unsustainable proportion very quickly. Historically a collapse eventually happens.

      What happens then? Those with no survival skills are still screwed, and those with wealth better protect their wealth from individual predators in addition to government.

      When I referred to the root cause, I was speaking as individuals. I feel it is a behavior issue. Unlike government, the individual has some element of control. If an individual wants to get out of poverty, they have a very high probability of doing so if they get an education, get married and then have a child. The stats are amazing.

      The politicos who take the behavior side of the issue never succeed in getting many people out of poverty. Their ideas never work, and will not work.

      Until there is a change in culture making an eduction, work, marriage and delayed parenthood the cool thing to do expect status quo to remain.

      Cool stuff, thanks for sending it along.

      Best regards,
      Dennis Miller